COVID-19 Vaccines: The Big Omicron Reboot For BioNTech, Moderna And Novavax
Summary
- The Omicron variant has made Wuhan based vaccines redundant, will replace Delta, and causes a milder version of covid.
- BioNTech, Novavax and Moderna will need to urgently develop an appropriate 2nd generation vaccine candidate.
- Each of the three will have advantages and disadvantages in a changed covid vaccine landscape.
- Omicron will disrupt the income and revenue expectations of all three vaccine manufactures on multiple levels.
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South Africa, on 24 November 2021, reported the discovery of a new SARS-CoV-2 variant which mutated significantly. It had been spreading silently, ostensibly originating somewhere in Africa with the South African incidents traced to Botswana. The new variant was also traced back to Egypt, Nigeria, Malawi, Namibia and Scotland. The origin of the new Omicron variant is still an unknown.
The World Health Organization (WHO) designated it a variant of concern within two days of the South African discovery and named it Omicron. Omicron has been spreading like wildfire around the world since 24 November 2021 and is destined to soon become the dominant variant globally, displacing the Delta variant.
There are a number of overarching themes relevant for investors in vaccine manufacturer's shares with regards to the Omicron variant.
- It is an escape variant.
- It has high transmissibility, enough to displace the Delta variant.
- Reports so far has symptoms as mild to very mild.
Scientists prefer to have answers which are one hundred percent evidence based or as close as possible to it. Investors on the other hand cannot wait for that kind of certainty as markets react to the mere suggestion of a risk. It follows that an investment analysis of Omicron will have to evaluate the Omicron themes on a risk basis.
Omicron, the escape variant
The initial reports on Omicron suggested that it is heavily mutated and very specifically, heavily mutated on the spike protein upon which covid vaccines were modelled.
"The variant stood out because it contains more than 30 changes to the spike protein - the SARS-CoV-2 protein that recognizes host cells and is the main target of the body's immune responses. Many of the changes have been found in variants such as Delta and Alpha, and are linked to heightened infectivity and the ability to evade infection-blocking antibodies." Heavily mutated Omicron variant puts scientists on alert, Nature, 25 November 2021
The global alarm was raised in the first instance because of the heavily mutated spike protein, the very basis of the two go-to vaccines of BioNTech (NASDAQ:BNTX) and Moderna (NASDAQ:MRNA). The scientists immediately expected the Omicron variant to evade vaccine protection.
The vaccine manufacturers took one look at Omicron and responded.
Moderna
"Moderna CEO says vaccines likely less effective against Omicron…Drugmaker CEO warns of "material drop" in vaccine effectiveness"
MODERNA ANNOUNCES STRATEGY TO ADDRESS OMICRON (B.1.1.529) SARS-COV-2 VARIANT, NOVEMBER 26, 2021
"First, Moderna has already tested a higher dose booster of mRNA-1273 (100 µg) in healthy adults.
Second, Moderna is already studying two multi-valent booster candidates in the clinic that were designed to anticipate mutations such as those that have emerged in the Omicron variant."
Third, Moderna will rapidly advance an Omicron-specific booster candidate (mRNA-1273.529).
Novavax
"Novavax (NASDAQ:NVAX) has already initiated development of a new recombinant spike protein based on the known genetic sequence of B.1.1.529 and will have it ready to begin testing and manufacturing within the next few weeks," according to a statement issued Friday. "We will continue to work with urgency to address this latest strain and the continued evolution of COVID-19." 26 November 2021
Novavax Statement on Omicron Variant Response, Dec 2, 2021
"First, Novavax is evaluating its vaccine against the Omicron variant, as the company has done for previous variants including Alpha, Beta and Delta. Second, Novavax has initiated development of an Omicron-specific vaccine construct."
BioNTech
BioNTech waited until 8 December 2021 to issue a formal statement while the CEO of Pfizer (NYSE:PFE) was paving the marketing way.
"Preliminary laboratory studies demonstrate that three doses of the Pfizer-BioNTech COVID-19 Vaccine neutralize the Omicron variant (B.1.1.529 lineage), while two doses show significantly reduced neutralization titers
Data indicate that a third dose of BNT162b2 increases the neutralizing antibody titers by 25-fold compared to two doses against the Omicron variant; titers after the booster dose are comparable to titers observed after two doses against the wild-type virus, which are associated with high levels of protection
As 80% of epitopes in the spike protein recognized by CD8+ T cells are not affected by the mutations in the Omicron variant, two doses may still induce protection against severe disease
The companies continue to advance the development of a variant-specific vaccine for Omicron and expect to have it available by March in the event that an adaption is needed to further increase the level and duration of protection - with no change expected to the companies' four billion dose capacity for 2022"
All three covid vaccine manufacturers immediately started development of an Omicron specific vaccine formulation while Moderna and BioNTech indicated an expectation of lower efficacy against Omicron.
Independent researchers evaluated the BioNTech covid vaccine against Omicron. A South African study found a 41-fold decline in neutralization of Omicron.
A German study reported these results:
"triple BNT162b2-vaccinated (sampled 0.5 or 6 months after boosting) revealed an 11.4-, 37.0- and 24.5-fold reduction, respectively"
"Neutralization of Omicron was 32.8-fold reduced using sera from double BNT162b2-vaccinated and infected individuals"
Often, what is not said, may be more telling. Lab testing against Delta was allowed and accepted as proof that the vaccines were effective against the Delta variant. That was a very low bar requirement and the global desperation about COVID-19 allowed that to slip past the normal requirements for a clinical trial. It was corrected when the applications for boosters and for children were submitted. This low bar requirement of only lab testing should not be the scientific standard for Omicron given the available information on reduced efficacy. Clinical trials should be the standard for testing the efficacy of Omicron formulated vaccines and for any new bivalent or multivalent formulations.
The available scientific information as well as the widely reported cases of vaccine breakthrough cases is sufficient for a conclusion that the mRNA vaccines are no longer effective as primary vaccination in a two-dose prime-boost combination. The German study also indicated that a booster shot for a "triple" vaccination is not effective.
A UK study by the UK Health Security Agency reported the following results (preprint not peer reviewed).
"Among those who had received 2 doses of BNT162b2, vaccine effectiveness was 88.0% (95%CI: 65.9 to 95.8%) 2-9 weeks after dose 2, dropping to 48.5% (95%CI: 24.3 to 65.0%) at 10-14 weeks post dose 2 and dropping further to between 34 and 37% from 15 weeks post dose 2….Nevertheless, a moderate to high vaccine effectiveness of 70 to 75% is seen in the early period after a booster dose." Effectiveness of COVID-19 vaccines against the Omicron (B.1.1.529) variant of concern
We now see dubious claims by politicians and vested interests which are not supported by any scientific studies or clinical trial evidence. Here are some from a BBC article:
"And vaccines are still likely to offer good protection against severe Covid that would need hospital treatment."
This a an almost standard inclusion in most comments or articles and yet there is no factual evidence that it is true for Omicron.
"although a third booster dose significantly increases protection to around 75%." Says the BBC, based upon the UK study which said something else entirely. Effectiveness of 70 to 75% in the early period after a booster dose seems to say the same as after the 2nd dose, some early efficacy after the booster, then waning rapidly after a few weeks.
The German study showed that a third dose may be as ineffective as two doses. There is no clinical study data to indicate that a booster shot will in fact make any difference to protection for a period longer than a couple of weeks. The UK study indicated that protection in the first 2-9 weeks were acceptable but could drop below 50% as early as after 2 weeks and by week 15 it was down to 34% to 37% effective. Boosters would probably follow the same trajectory. Expecting people to get a booster shot every 2-3 months will not gain public acceptance and the vaccine must be considered a failure against Omicron if its protection wanes below 50% after as little as 2 weeks.
Just look at the media, marketing and political statements, they all have inherent disclaimers, "likely to offer" (BBC), "around 75%" BBC, "may still induce protection against severe disease" (BioNTech/Pfizer) or "more robust protection may be achieved by a third dose" (BioNTech/Pfizer). Political and marketing talk, empty of any verifiable factual evidence.
The point is simply this, the current mRNA vaccines are no longer sufficiently effective against COVID-19. The science shows it, and the real-world reporting shows it. Novavax has yet to provide any information on the efficacy of its vaccine against Omicron but there is no reason to expect the Novavax vaccine to perform better than the mRNA vaccines in any material way as they also target the Wuhan spike protein which in the case of Omicron is heavily mutated from the Wuhan version which they have based their vaccine upon.
Scientists like to explain the neutralizing antibodies as a key to a lock. The neutralizing antibody generated by the vaccine will bind to the spike protein of the virus and prevent it from infecting the cells like a key that fits to a lock. A heavily mutated change in the spike protein, and the key cannot fit the lock. Neutralizing antibodies generated by a vaccine based upon the Wuhan strain can be generated en masse and still not bind or imperfectly bind to the spike protein of the Omicron variant which is, of course, why it is an escape variant.
I'll leave it to the marketers and politicians to argue why the Wuhan strain vaccines will still work but a new formulation will be required from all covid vaccine manufacturers from an investor point of view. No use to beat around the bush about it, Omicron escapes the current crop of covid vaccines far too efficiently. Selling ineffective vaccines as primary or as booster shots, politically and commercially, will increase vaccine hesitancy and destroy the public's trust in covid vaccines.
Omicron, highly transmissible and infectious, sufficient to become the dominant variant
The transmission characteristics of Omicron is also well enough established from an investor point of view.
"Omicron has the potential to spread much faster and infect vastly more people than Delta, says Tom Wenseleers, an evolutionary biologist at the Catholic University of Leuven in Belgium. Based on the rise in COVID-19 cases and on sequencing data, Wenseleers estimates that Omicron can infect three to six times as many people as Delta, over the same time period." How bad is Omicron? What scientists know so far, Nature, 02 December 2021
This chart from the UK Health Security Agency published on 10 December 2021 shows how Omicron is outcompeting Delta in the UK.
Source: SARS-CoV-2 variants of concern and variants under investigation in England, Technical briefing 31, 10 December 2021
The UK has also now given up on red-listing countries. "The red list was reintroduced in late November as a precaution after the emergence of the Omicron variant. But Health Secretary Sajid Javid said it had spread so widely the rules no longer had much purpose."
The WHO, Technical Brief published on 10 December concluded that it is likely that Omicron will outpace Delta where community transmission occurs.
"Based on current limited evidence Omicron appears to have a growth advantage over Delta. It is spreading faster than the Delta variant in South Africa where Delta circulation was low, but also appears to spread more quickly than the Delta variant in other countries where the incidence of Delta is high, such as in the United Kingdom. Whether Omicron's observed rapid growth rate in countries with high levels of population immunity is related to immune evasion, intrinsic increased transmissibility, or a combination of both remains uncertain. However, given the current available data, it is likely that Omicron will outpace the Delta variant where community transmission occurs."
The WHO Technical brief also states that Omicron has already been found in 63 countries as of 9 December 2021. The Economist proclaimed Omicron as the dominant variant in South Africa on 7 December 2021. The South African Minister of Health mentioned in a media briefing on 10 December 2021 that 70% of genomic sequencing results during November in South Africa were the Omicron variant. South Africa's active daily cases of covid was 20,601 on 23 November 2021, 20,610 on 24 November 2021 and 174,340 on 13 December 2021. Omicron already dominated at 70% of sequenced samples in November 2021. It is very likely that Omicron have now mostly displaced Delta in South Africa.
Available information on transmission and displacement is sufficiently robust for investors to reach a risk-based conclusion that Omicron will displace Delta as the dominant covid variant across the globe.
Omicron symptoms are generally mild to very mild
The GP who first alerted the world to the presence of Omicron advised that the symptoms were mild. I've seen the comments, what does she know she's just a GP? She also is the Chairperson of the South African Medical Association and discussed it with the other GP's who agreed with her. More South African doctors have stepped forward to support the view that the symptoms of Omicron are generally milder than Delta. It is also reported that the South Africa's National Institute for Communicable Diseases advised that only around 30% of hospitalized covid patients in recent weeks were seriously ill at less than half the number during previous waves of covid, average hospital days dropped to 2.8 days from 8 days during previous waves and recent deaths were only 3% of hospitalized patients as opposed to 20% during previous waves.
Even the WHO is prepared to now entertain the thought that Omicron may have milder symptoms though they are in the science camp of absolute proof.
"There are still limited data on the clinical severity of Omicron. While preliminary findings from South Africa suggest it may be less severe than Delta, and all cases reported in the EU/EEA to date have been mild or asymptomatic, it remains unclear to what extent Omicron may be inherently less virulent. More data are needed to understand the severity profile."
So, all the data so far point to less severity, but we are not yet prepared to call it says the WHO. Investors do not have this luxury of waiting for absolute certainty.
The Financial Times have done an excellent article on severity of Omicron on 7 December 2021, and showed Omicron relative to Delta causing less hospitalizations, less severe symptoms, less ICU requirements and less ventilation requirements.
The fast transmission of Omicron even with milder symptoms may cause hospitalization risks but no health care issues have developed in South Africa up to today, 14 December 2021. No sensational media reports of hospitals overwhelmed. In fact, the CEO of Netcare, the largest private hospital group in South Africa repeatedly said that admissions for covid is low, symptoms are mild and hardly any oxygenation therapy is required.
"The CEO of leading South African private hospital group Netcare says the 10,000-bed establishment has had just 22 Covid-19 mortalities in the past month compared with up to 50 per day during previous waves of infection. He says early indications are the virus is mutating just like the Spanish Flu did with successive waves becoming increasingly milder until the virus posed little risk to human beings." Netcare's CEO confirms early optimism on Omicron: fractional mortalities, few admissions, minimal oxygen support, 13th December 2021.
I have previously discussed the evolutionary arms race between host and parasite. The ideal development for the parasite (virus) is to co-exist with the host in an evolutionary equilibrium where the survival of both the host and the parasite is assured and the parasite causes minimal harm to the host. The case study of the introduction of the myxoma virus (MYXV) into the European rabbit population of Australia describes this evolutionary path.
The European rabbit is a pest in Australia. Australia introduced the MYXV virus as a biological control measure to the rabbit population as this virus is horribly fatal to rabbits. The virus decimated the rabbit population but over time both host (rabbit) and parasite (virus) coevolved to an evolutionary equilibrium where both survived and the attempt at biological control ultimately failed. The more scientific case study describes the outcome thus:
"This benign host-pathogen coexistence has been presented as a text book example of an evolutionary climax in which the pathogen causes little harm to the host and both host and pathogen survive."
There are no absolutes with regards to the evolutionary paths of both host and parasite. It is also disconcerting to read the history of the Australian attempt to eradicate the rabbits, which almost succeeded. It is a reminder that we as humans could have experienced a much worse outcome from a novel virus than what we did with covid. It is also a reminder of the important role played by the first generation of covid vaccines.
That does not change the reality of the emergence of the Omicron variant. It is following the traditional evolutionary script in the arms race between host and parasite. Once again, from an investor point of view it must be obvious that there is more than sufficient information available informing a view that the Omicron variant is a "milder" version of the SARS-CoV-2 virus.
Implications of Omicron for investors in covid vaccine manufacturers
The discussion above has more than sufficient investor actionable information on the three key results for vaccine manufacturers regarding Omicron. The highly likely answer to all three implications is in the affirmative. Omicron escapes Wuhan generation vaccine protection, Omicron will replace Delta, and Omicron is milder than Delta. The risk to investors is in ignoring these implications and not in embracing them.
What then are the consequences if all three are true, generally to all vaccine manufacturers and specifically to BioNTech, Novavax and Modena?
General implications, bluntly speaking.
- The Wuhan variant vaccine formulations are now redundant and must be discontinued.
- All manufacturing of Wuhan variant vaccine doses should be discontinued or reduced to an absolute minimum to avoid a stockpile of redundant vaccines.
- Rolling out booster shots to ward against Omicron for a few weeks may have limited value and risk a public backlash.
- New strategies will be required for 2nd generation vaccines, efficacious against Omicron and prior variants.
- New strategies for vaccine distribution and public acceptance of booster shots will be required to counter vaccine hesitancy in the case of a milder Omicron variant circulating.
- The process of developing a 2nd generation vaccine, completion of regulatory required clinical trials, and the repurposing of manufacturing for a new formulation will probably take longer than initial guidance.
- Manufacturing of a new formulation may introduce manufacturing challenges, cost challenges, and teething problems.
- Distribution of the covid vaccines may shift from mostly government procurement and roll-out, to the private sector, similar to the procedures for flu vaccines.
- The unknowns of the transition from Wuhan based vaccines to a new Omicron covid vaccine landscape will be disruptive and will certainly impact the income and revenue expectations for vaccine manufacturers.
BioNTech
The BioNTech/Pfizer partnership has developed certain characteristics, some positive and some negative. Meticulous execution is their strongest advantage. Develop a 2nd generation vaccine, comply with regulatory requirements, and bring it to market. They have proven their competence in this regard and can be expected to produce a similar result. The advantage of cash on hand from Wuhan variant-based vaccine sales will significantly strengthen their hand.
Two limiting factors stand out. Toxicity of the mRNA platform which may limit their ability to develop a multivalent, 2nd generation vaccine candidate and the albatross of the BioNTech vaccine logistics. Perhaps they can solve both but there is nothing right now which indicate that they will have guaranteed success on the limiting factors.
Comment: My expectation is that BioNTech would successfully formulate a new candidate vaccine which will protect against Omicron specifically and potentially formulate a suitable bivalent, perhaps Delta/Omicron or Wuhan/Omicron, for a reasonable all-round protection. I do not expect them to have any logistical solutions which would have a material impact on their logistical limitations. The new vaccine candidate combined with their execution strength may get them to market before Moderna and Novavax, but side effects could become a major stumbling block where Omicron has mild symptoms. The BioNTech/Pfizer partnership will be best placed to navigate a transition to covid vaccine distribution by the private sector. BioNTech/Pfizer can be expected to successfully navigate legal agreements on manufacturing of components, sales, and advance purchase agreements.
Novavax
The virtual silence from Novavax is not ideal under the circumstances. Novavax has only recently filed applications for the approval of their Wuhan based vaccine candidate. Manufacturing issues, delays and regulatory applications were problematic for Novavax. The arrival of Omicron will probably require them to start from scratch with a new 2nd generation vaccine candidate. They will then have to repeat the manufacturing and regulatory compliance steps without the cash buffers which BioNTech and Moderna will have. Novavax has the most advantageous vaccine platform with potential to develop a 2nd generation multivalent candidate vaccine even combined with an Influenza vaccine. The manufacturing challenges for producing such a vaccine candidate, given its track record, may once again relegate them to being a laggard.
Comment: My expectation is that Novavax could develop the best suited 2nd generation vaccine candidate for the changed vaccine landscape. I would need some convincing with regards to the manufacturing of such a 2nd generation vaccine candidate at scale as well as the timely compliance with regulatory requirements. Manufacturing at scale not only at SII but also at the Novavax controlled or owned facilities. Novavax, as with Moderna, has no retail distribution experience or networks which will be a major disadvantage should the vaccine market move from the public to the private sector. The complexity of the Novavax manufacturing arrangements with multiple parties may pose legal challenges to Novavax to realign all agreements to a new vaccine candidate.
Moderna
Moderna's mRNA Wuhan vaccine candidate has a higher dosage and less advantageous safety profile than the BioNTech Wuhan vaccine candidate, to the extent that some EU countries do not recommend the vaccine for use in persons under the age of 30. The Moderna logistical arrangements are also generally challenging. Moderna has a proven track record of manufacturing at scale and the ability to complete the processes required to develop a new vaccine candidate as well as achieving regulatory approvals. The toxicity of its vaccine candidate and the side effects already limiting its distribution and acceptance will hamper its ability to develop a multivalent 2nd generation vaccine candidate.
Comment: I expect Moderna to successfully develop an Omicron 2nd generation vaccine candidate and potentially a bivalent candidate. Moderna should also be well placed to manufacture such a 2nd generation vaccine candidate. Moderna, as with Novavax, has no distribution network to sell its vaccine candidate should the market shift from the public sector to the private sector. Any new vaccine candidate with similar side effects as the previous versions will probably struggle in an environment where Omicron causes mild or asymptomatic disease. I would expect that Moderna will again attempt to ride in the BioNTech/Pfizer slipstream internationally mostly targeting developed world markets and to develop a private sector presence in the USA market.
Conclusion
- A forward-looking market will evaluate the vaccine manufacturers based upon available information on Omicron in a changed covid vaccine landscape.
- Three key issues arise from the arrival of the Omicron variant. The current Wuhan based formulations will most likely be made redundant by an escape variant Omicron. Omicron will most likely become the dominant variant and all information so far indicate that it will be a milder version than Delta.
- Each of the three key issues has consequences for a changed vaccine environment which carries a high risk of negative disruption to vaccine manufacturers and a significant reboot of the covid vaccine market.
- The size of the post-Omicron covid vaccine market cannot be established without more certainty as to the consequences of the changed marketing requirements and the characteristics of 2nd generation vaccine candidates. We'll have to return to this aspect once we have suitable information.
- Attempts to sell the now redundant Wuhan based vaccines to the public as still their best option could backfire very badly with more vaccine hesitancy and an attitude of, what's the purpose, when protection is fleeting.
- Investors in vaccine stocks should clinically evaluate the risks introduced by the Omicron variant to the revenue and income expectations for each vaccine manufacturer and its implications for the share price of each.
This article was written by
Disclosure: I/we have no stock, option or similar derivative position in any of the companies mentioned, but may initiate a beneficial Short position through short-selling of the stock, or purchase of put options or similar derivatives in BNTX, MRNA, NVAX over the next 72 hours. I wrote this article myself, and it expresses my own opinions. I am not receiving compensation for it (other than from Seeking Alpha). I have no business relationship with any company whose stock is mentioned in this article.
Related Stocks
| Symbol | Last Price | % Chg |
|---|---|---|
PFEPfizer Inc. | 61.25 Post. 61.08 | 4.17% -0.28% |
BNTXBioNTech SE | 283.68 Post. 283.00 | -1.17% -0.24% |
MRNAModerna, Inc. | 282.02 Post. 280.99 | -0.45% -0.37% |
NVAXNovavax, Inc. | 194.92 Post. 194.45 | 8.60% -0.24% |
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